Comments from Fed official Esther George, who said Tuesday she supported slowing the pace of Fed bond purchases "as an appropriate next step," raised expectations that the central bank might start winding down its aggressive purchases of government bonds.

The Fed's program is a big plus for stock markets: Some $85 billion a month in purchases have helped keep interest rates low and caused investors to shift out of bonds and into stocks.

"People are afraid that the Fed will start to withdraw from the market soon," said Francis Lun, chief economist at GE Oriental Financial Group in Hong Kong. "The flood of liquidity will start to dry up. Then the money will start to flow out of Asia. That is the fear."

The Nikkei 225 index tumbled 3.8 percent to 13,014.87 with investors unimpressed by the lack of detail in Prime Minister Shinzo Abe's unveiling of the third plank of his so-called Abenomics program intended to rouse a long-stagnant economy.

Analysts were preaching caution ahead of May data on U.S. service industries, which are the largest component of the economy by far.

DBS Bank Ltd. in Singapore said an improvement in the Institute for Supply Management's service sector index would be surprising, especially in light of this week's manufacturing report that showed U.S. factory output contracting in May.

"The manufacturing measure has fallen three months in a row. The service sector version is steadier and slower moving but it doesn't typically buck the trend," DBS analysts said in a market commentary.

Most important will be Friday's jobs report for May. The figures are usually the U.S. economic release with the greatest market impact.

It's also a big week in Europe, with the European Central Bank meeting to discuss the region's ailing economy and whether anything more needs to be done to get it growing again. The latest expectation in the markets is that the ECB will refrain from announcing any big new measures Thursday.

Benchmark oil for July delivery was up 47 cents to $93.78 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 14 cents to $93.31 a barrel on Tuesday.

In currencies, the euro fell to $1.3064 from $1.3082 late Tuesday in New York. The dollar fell to 99.75 yen from 100.05 yen.